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Titlos SPV - Back In The Spotlight
You read about it here a week ago, not to mention here. Now read about it (almost verbatim) in the Wall Street Journal.
Of course, little do we care about such minor things as attribution. As long as the truth is out there...
Greece's fiscal woes, the exposure of the European financial system
to them and the role played by Wall Street in hiding the problems all
converge in a fifth-floor office near London's Liverpool Street station
where a company called Titlos PLC was created in early 2009.
Just 22 days after Titlos was born, the National Bank of Greece SA and Goldman Sachs Group Inc. arranged for the company to sell €5.1 billion, or about $2.04 billion, in notes, according to U.K. and U.S. documents.
But Titlos wasn't a real company and the notes weren't designed for
ordinary investors. Titlos doesn't make anything and its only directors
are two British executives who work for a firm that specializes in the
formation of corporations and the sale of pooled assets.
Instead, Titlos, descendent of a 2001
deal to help Greece hide debt, was set up to take advantage of a
European Central Bank effort to inject cash into a banking market
hobbled by the financial crisis. Titlos's notes were designed to be
pledged for that program, according to filings by Titlos and the
National Bank of Greece, and the buyer was the bank itself.
The history of Titlos also illustrates
how bank and government dealings, often deeply intertwined, can
complicate efforts to unclog a global banking system.
Gustavo Piga, a professor at the
University of Rome Tor Vergata, says the opaque derivative trades that
Greece and other countries engaged in "tarnishes the reputation of
government" as it tries to police financial markets.
"There is this huge mortal embrace between the government and the
banks," Mr. Piga says. "It creates huge conflicts of interest in the
actions of government."
Behind Titlos and the notes sale are Goldman and the National Bank
of Greece, a 169-year-old institution whose operations span Eastern
Europe into Turkey, Serbia and Romania. The bank isn't the country's
central bank, though the government owns a 12% stake through its
pension system.
Goldman, the National Bank of Greece and the Greek government have
long had close ties. Last week, Greece named Petros Christodoulou, who
worked at both Goldman and the National Bank of Greece, as the
government's new debt chief.
Titlos's origin dates to 2001 and a complex transaction that at its
crux called for Goldman to loan Greece €2.4 billion. The structure
permitted Greece to lower the debt it had.
Over the next decade, the structure would prove to be malleable—and
legal. In total, from 1998 to 2000, Goldman structured 12 currency-swap
agreements with Greece, leading up to the 2001 transaction.
Greece's finance minister last week
said the original transaction met with the legal standards of the
European Union's statistics watchdog. Moody's Ratings Service rated the
2009 deal.
"This was a unique deal," says Christoforos Sardelis, the head of
Greece's debt-management agency from 1999 to 2004. "It was made public,
and there was no violation of any rules."
To hedge its credit risk, Goldman
carried out a transaction with a small Dublin firm. The investment bank
also agreed to a new deal with Greece that was structured as a way to
hedge interest-rate risk. That deal compensated Goldman for losses it
was experiencing from the currency swap, according to a person familiar
with the transaction.
Goldman then exited from the interest-rate-swap deal in 2005 when
the National Bank of Greece replaced Goldman as Greece's trading
partner, according to people familiar with that transaction.
In late 2008, with the financial crisis peaking and banks struggling
to borrow from one another or sell pooled assets, Goldman and the
National Bank of Greece identified a way to turn that interest-rate
transaction into an asset that could be pledged at the European Central
Bank for money as part of a program the ECB had set up to exchange bank
collateral for billions of euros in loans.
The program ended up offering a way
for banks to easily make money because they could use the ECB's cheap
money to obtain or hold higher-yielding assets in what is known as a
carry trade. The moves then freed up liquidity for banks, including
those in Greece that have been big users of the ECB program.
"There were a very large number of securitizations done during the
financial crisis, of toxic waste, that were designed precisely for the
purpose of creating collateral for ECB repo loans," said Darrell
Duffie, a Stanford University finance professor and derivatives expert.
"The ECB knew this was happening and decided that they wanted to play
along in order to get liquidity out there."
An ECB spokeswoman declined to comment.
U.K. documents show that Titlos, which
filed its incorporation records Feb. 4, 2009, is housed in a London
financial district office occupied by Wilmington Trust SP, a firm that
caters to corporation formations and securitizations. Both Titlos
directors work for U.S. bank Wilmington Trust Corp. One director, who
describes his occupation as a "director of special purpose companies
for financing transactions," also serves as a director of nearly 200
other enterprises, the U.K. documents show.
To finalize the deal, the National Bank of Greece transferred, or
novated, its role as counterparty to Greece to Titlos, which now meant
that cash flow from Greece would be running through Titlos and that
Titlos would sell notes that then could be pledged to the ECB.
On Feb. 26, just 22 days after Titlos
filed corporation records with the U.K., Titlos sold €5.1 billion in
notes maturing in 2039. The notes, rated "A1" by Moody's Investors
Service, then were repurchased by the National Bank of Greece through a
private placement, according to a National Bank of Greece securities
filing.
According to that report, "the notes
will be used as security for obtaining liquidity from the ECB." It
isn't known if the notes currently reside at the ECB. Those collateral
pledges have been subject to a haircut, or charge, levied by the ECB.
One question today is whether a party to the transactions remains at
risk of a large collateral payment following a ratings-agency
downgrade. That concern stems from what happened in 2008 when U.S.
insurance giant American International Group Inc. nearly failed because its own counterparties, including Goldman, demanded payments AIG couldn't cover.
A Titlos prospectus indicates that Greece isn't on the hook for a
collateral payment to Titlos if Greece is downgraded. The National Bank
of Greece, which remained in the transaction to provide hedges for
Titlos, is responsible for collateral payments if the bank is
downgraded to certain levels, according to Moody's.
The notes remain tightly intertwined,
though, with Greece. In December, Moody's downgraded the notes to "A2,"
midway between the ratings agency's highest triple-A rating and its
first junk-bond grade, from A1 after the ratings agency had downgraded
Greece to A2 from A1.
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...and with no attribution
Hey, the New York Times does it too. See
Do Blogs Compete at a Level that Threatens Mainstream Media?To hedge its risk Goldman carried out a transaction with a small Dublin firm.
Dublin based and Irish owned; or just Dublin based? Any name for this firm?
My guess would be that it's almost certainly another foreign-owned IFSC special. The Irish Financial Services Centre is a real piece of work.
http://www.independent.ie/business/irish/depfa-demise-could-have-been-ir...
I believe it was O'Benshalom and McGeithner, Investment Advisors.
try Depfa
TD and team have done a phenomenal job covering Greece. Thanks guys.
Next stop, Italy, Portugal, Spain, Ireland...who's it gonna be?
California?
and some people talk about bull market......
It doesn't appear that Greece has quite expired yet!
It can get complicated. Look at my latest post here or on my site concerning the CEE countries (flat out depressions) and the exposure of the Greek banks.
Then there's UK, Ireland, the nordics... Europe is becoming a house of cards.
How in the world could these be rated A1 on February 26,2009, the world then was falling off a cliff and no one was lending to anyone ... how does Moody's rate these swaps backed by a securitized repo ... then pledged to the ECB as an asset, priceless (oh no just 5.1B) ... does the ECB take Moody's word for it? Or do they even care? Or did they suggest it?
Does any one have the book Swaps and Repos for Dummies? I need a flow chart.
In looking at the great job the agencies did with CDO's, LEH, AIG etc... I would say if the check to moody's doesn't bounce they will pour a little A1 sauce on that paper.
Pretty much the reason I no longer have a WSJ subscription.
Lufthansa pilots just went on strike, planned for 4 days. Social mood in Europe becoming quite interesting. Of course, reading most of the main stream in the USA, everything is peachy keen and the recession is over. I must have missed the memos about our banking system, debt levels, ad infinitum. The spin by bank analysts, the media, and the US gov't is just hysterical. A hard rain is gonna fall.
There is no "Europe" government as there is a government of the disUnited States. When will people wake up to this fact?
North America is the true comparison to Europe. And North America there is pretty much only three countries, of which one has 80% of the population.
There are countries on the continent of Europe and off the continent like Ireland and Great Britain that comprise a group of nations that is loosely "Europe".
And in those countries like Greece it is far easier from a "nationalist" identity for people to rise up against their governors, witness Italy's Berlusconi getting clobbered (Oh to be able to do that Paulson, Bernanke, Lord Blankfein). France is notortious for dissenters who will burn down the house to make their point. Here in the disUnited States we have states many of which have only experienced the slightest effects of the depression that plagues the world. And cities that are larger than some European countries that are doing very well considering.
A hard rain is gonna fall but it will not be a national deluge. I'd love to see Detroit erupt into a conflagration if only to send a harbinger to the Elite whose own town might be next if some scalps aren't hanging from the flagpole soon.
si Senor(another good Dylan tune, preformed by JGB of course)
someone registered with online.wsj should use comments area to post back to the two week-old ZH links. two-bit plagiarists.
nice work, TD, as usual!
What the heck is going on in Asia? Who is giving out free cash? 3% on no news or expectations of it?
US didn't tank from all the bad news last week and market is ready (I hope not) for a upside breakout at the 1111. Goldmansan is everywhere.
TD you really should email the ombudsman or something. This is weak.
Doesn't this mean that Greece bought its own debt?
A hard rain is going to fall, perfect, just perfect. The clock is ticking.
Imitation is the sincerest form of flattery.
I used to think that Lizzy until some recent unpleasantness.
we are getting close to being back to the major trendlines from the 2007 tops. for RUT it is at 647 or so, and for the dow it is at 10550ish. I think if we breach those to the upside, then the website should switch from realism to all positive news all the time, b/c that would be a huge bullish sign. If the averages turn back again at the trendline like they did in january then we can go on here as usual.
The market is climbing a Wall of What Me Worry?
What's debt, UE, housing woes, Greece, Italy et al, China tightening, 24/7 money printing...when there are obscene profits to be made in this bull market?
For those of you keeping score at home, today will make it 22 for 26 explosive Mondays on that anything but Yellow (Metal) Brick Road Wall Street.
Alfred E. Neuman should be the face of the world's reserve currency, and Christopher Walken's "The Continental" is more than appropos for the Euro. What the heck, Mao is on the renminbi, and history credits that miscreant for 50 million plus exterminated potential consumers.
i wish there was a way to edit posts. I made an error in my post. The downtrendline for the dow is at around 10650ish not 10550ish, so there is a bit more room, but really if it blows through there, I don't see how anyone who studies the technical side could remain intermediate or short term bearish
Oh, the Journal is saying that; "just because those ZH conspiracy theorists said it first no longer makes it invalid"? The world turns.... Too bad Rupert is leaving his empire to folks who have no concept of what it is to be conscious people, journalists or otherwise.
What bloggers can't steal or link to the MSM shit without catching hell, but they can now pull this crap off? Come on. Blogs are the only place real news is reported and will be the power of the future (as long as we have the net). Screw the MSM. Bunch of friggin pwned cheerleading propogandist bullshitters.
eh. nothing to get worked up about. they're on their last legs, expect a few desperate moves and then poof.
couldn't these financial institutions save a lot of money if they all fired their independent cpa's who clearly are clueless as to what is going on? or it is hush money?
having a sister that was a "reporter" for a local news station, I can tell you that there are very few if, any, true "reporters" that actually go out and uncover the news. Most sit back and read the police blotter and wait for the phone to ring for a tip. If the phone doesn't ring, it most likely will not be reported...
Once again, huge hat tip to Tyler and ZH
Doing God's work.
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